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Mainland China to account for half of Hong Kong's wealth assets in 5 years

Money flowing in from mainland China will help drive an expected 6%-10% annual growth in Hong Kong's wealth management assets, currently estimated at US$1.45 trillion, according to a survey by an industry association.

Over the next five years, 51% of the industry's AUM will come from mainland China, compared with 40% in 2020, according to a survey conducted by Hong Kong's Private Wealth Management Association, or PWMA, and KPMG China. In 2021, as much as 37% of wealth being managed in Hong Kong originated locally, 14% from other Asia-Pacific economies and 9% from the rest of the world.

"Hong Kong remains one of the world's most robust private wealth management hubs. ... Mainland China has continued to be a key priority for our members, particularly with the launch of the Wealth Management Connect pilot scheme," said Amy Lo, chair of PWMA and chief executive of UBS Hong Kong.

The Wealth Management Connect program, which gives investors in the Greater Bay Area — a megapolis that includes nine cities in mainland China, Hong Kong and Macao — mutual access to stocks and bonds, was extended to wealth management products under a pilot scheme launched in September.

The scheme is still in its early stages and only very simple investment products are allowed, Lo said at a press conference Oct. 4. The association will continue to engage with authorities on ways to expand the scope of the scheme by broadening the product scope and increasing the quota to around HK$8 million per individual investor, Lo said. Currently, each individual investor only has a quota of 1 million Chinese yuan.

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The mutual market access program will be the main growth driver for Hong Kong's private wealth management industry in the coming years, Lo said. Banks that operate in the city, such as Bank of China Ltd. and BOC Hong Kong (Holdings) Ltd. are already gearing up to serve more mainland Chinese customers. Similarly, The Bank of East Asia Ltd., Standard Chartered PLC's Standard Chartered Bank (Hong Kong) Ltd., HSBC Holdings PLC's units The Hongkong and Shanghai Banking Corporation Ltd. and Hang Seng Bank Ltd. are expected to tap investors using the connect program.

Hong Kong is the largest wealth management hub in Asia and is on track to replace Switzerland as the largest globally by 2023, according to consultancy BCG.

The industry is expected to grow by 6% to 10% per annum over the next five years, according to the PWMA survey. In 2020, Hong Kong's private wealth management industry grew by 25% to HK$11.3 trillion, attributed to net fund inflows of HK$656 billion as well as a 17.5% return on assets, the association said, citing data from Hong Kong's Securities & Futures Commission.

Apart from mainland China, targeting the next generation of entrepreneurs is the biggest growth opportunity for Hong Kong's wealth management industry, according to the survey. Engaging the upcoming cohort that will inherit the wealth of Asia's high net worth families is particularly important for wealth managers, especially as the region is undergoing possibly the biggest wave of wealth transfer in history.

"Servicing the next generation is clearly a major opportunity given the significant transfer of assets we are seeing between generations and the enormous wealth creation among NextGen entrepreneurs," said Peter Stein, CEO and managing director of PWMA.

As of Oct. 1, US$1 was equivalent to 6.45 Chinese yuan.